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Q1 2025 Solo Brands Inc Earnings Call

Q1 2025 Solo Brands Inc Earnings Call

Yahoo13-05-2025

Mark Anderson; Senior Director of Treasury & Investor Relations; Solo Brands Inc
John Larson; Interim President and Chief Executive Officer; Solo Brands Inc
Laura Coffey; Chief Financial Officer; Solo Brands Inc
Operator
Good morning, and welcome to the Solo Brands's fourth-quarter in fiscal year 2024 financial results conference call. (Operator Instructions) Please note this event is being recorded. I would now like to turn the conference over to Mark Anderson, Senior Director, Treasury, and Investor Relations. Please go ahead.
Mark Anderson
Thank you, and good morning, everyone. We appreciate you joining us for the Solo Brand's conference call to review fourth-quarter and full year results for 2024. Joining me on the call today are the company's Interim President and Chief Executive Officer, John Larson; and Chief Financial Officer, Laura Coffey.This call is being webcast and can be accessed through the Investors portion of our website at investors@solobrands.com. Today's conference call will be recorded. Please be advised that any time sensitive information may no longer be accurate as of any replay or transcript reading date.I would also like to remind you that the statements in today's discussion that are not historical facts, including statements about expectations, future events, financial performance, turnaround efforts, strategic transformation goals, and future growth, are forward-looking statements and are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.Forward-looking statements by their nature are uncertain and outside of the company's control. Actual results may differ materially from those expressed or implied. Please refer to today's earnings press release for our disclosures on forward-looking statements. These factors and other risks and uncertainties are described in detail in the company's filings with the Securities and Exchange Commission.Solo Brands assumes no obligation to publicly update or revise any forward-looking statements. Management will refer to non-GAAP measures and reconciliations to the nearest GAAP measures can be found at the end of our earnings release. Finally, the earnings release has been furnished to the SEC on Form 8-K.Now I'd like to turn the call over to John Larson.
John Larson
Good morning, and thank you all for joining us to review Solo Brand's strategic plan and financial results. During today's call, we intend to level set everyone on recent news, review our 2024 financial results, and share our turnaround work for 2025.During the fourth quarter, the board and management team engaged in developing an aggressive turnaround plan for 2025. As part of our transformation plan, we hired external financial advisors to help us go through every line item of the business. They have been an integral part of helping to develop and quantify 30-plus value accretive initiatives.As most of you know, Chris Metz notified the Board in mid-February of his decision to resign. Given that the board and management team were closely involved in the 2025 turnaround plan, we felt it was critical not to lose momentum. I was immediately appointed as Interim CEO and in the office the following Monday morning.Then stepping into the role, I along with the leadership team and board, have taken actions to accelerate and amplify the company's transformation plan. I plan to continue serving on the board and remain interim leader on site until the right person to lead solo brands is identified.Firmly believed that we lost no time or momentum with the management change. We are now aggressively working through 30+ value creative initiatives to return solo brands to profitable and sustainable growth. Notwithstanding challenging results, we believe Solo Brands has a solid foundation for success, including great enthusiast brands, a pipeline of new products, and highly loyal customers. I am encouraged by what I see here.Our board and management team are fully aligned and taking thoughtful steps to improve the near-term and long-term business trajectory. We do not plan to take questions after our prepared remarks. This decision was not taken lightly, but I hope that Laura and I answer most, if not all, of your immediate questions during these prepared remarks.After Laura walks through the financial results, I will come back to discuss in more detail the key strategic initiatives. Laura?
Laura Coffey
Thank you, John, and good morning, everyone. We finished 2024 with total net sales of $455 million down 8% from the prior year. We strengthened our adjusted gross profit margin to 61.7%, and we ended the year with an adjusted EBITDA of $32.6 million or 7.2% of net sales.We recognize the challenges ahead, and we are committed to transforming our business by stabilizing operations, optimizing efficiencies, and building scalable processes and platforms to drive sustainable growth. Turning to our fourth quarter results, net sales were $143.5 million, down 13.2% from a year ago. This was driven by declines in retail and direct-to-consumer channels within the Solo Stove segment, partially offset by increased net sales in the Chubbies segment.We are carefully evaluating the effectiveness and return of our marketing spend. Although the Snoop ads created good brand awareness last year, we are working to better position spend to be more efficient and tied to the outcomes that align closer to our goals. Our gross profit for the quarter was $87.8 million compared to $96.4 million in the prior year.Our reported gross profit margin grew to 61.1%, up 280 basis points compared to 58.3% in the year ago quarter. Selling general and administrative expenses for $81.8 million in the quarter, down from $84.3 million in the prior year.The improvement in SG&A expenses were mainly due to the early termination of a legacy advertising agreement. The fourth quarter's net loss was $58.2 million and adjusted net income, excluding after-tax restructuring charges and other non-recurring or non-cash charges resulted in positive earnings of $2.3 million and adjusted EPS of $0.03 per share.Adjusted EBITDA for the quarter was $6.3 million with a margin of 4.4%. Turning to the full year results, 2024 net sales were $454.6 million, down 8.1% from the prior year. Our reported gross profit margin for the year was 57.3%, and excluding inventory charges related to restructuring and consolidation and other non-cash items, our adjusted gross profit margin was 61.7%, up 30 basis points from the prior year.The company reported a GAAP net loss of $180.2 million, an improvement versus a net loss of $195.3 million in 2023. Adjusted net income was $11.4 million or EPS of $0.12, and our adjusted EBITDA was $32.6 million or 7.2% of net sales for the full year in 2024.Please refer to our earnings release for reconciliation tables to the most comparable GAAP measures. In early 2025, we continued implementing corporate restructuring and cost optimization initiatives to re-baseline expenses and right size of the business based on expected sales this year.We have examined the company's marketing effectiveness and have a multi-step plan to improve efficiencies and address spend, which John will discuss in a few moments. We have begun creating better performance management metrics and are evaluating talent at every level. I want to give you a few examples of actions that we have taken thus far after careful consideration.We consolidated two distribution centers and are looking to sublease those facilities. We believe this is necessary to maintain operating leverage across our fulfillment network. We are continuing to evaluate and make strategic decisions to lower costs and respond to business needs.We successfully renegotiated freight contracts for the organization in mid-2024 and are currently exploring other opportunities to reduce our spend in this area. After the holiday period, we decided to take an action on a reduction in force primarily to streamline our Solo Stove segment marketing and operational functions.We also rationalize certain operations, reduced overhead costs, and re-baseline cost to better align with the sales going forward. We have decided to pause, our financial guidance based on the challenging and uneven consumer environment anticipated this year, and uncertainty with tariffs.However, we are targeting improving profitability compared to a year ago, especially as we expect our major initiatives to ramp up in the second half of the year. Regarding tariffs, we are actively addressing the impact on our business.In some instances, we have proactively shifted production to alternative countries to avoid China-specific impacts while exploring mitigation tactics to even further reduce tariff headwinds. Although there continues to be uncertainty regarding the operation and duration of tariffs, we are currently estimating the impact to be significant to our operations before planned mitigation activities.Turning to the company's balance sheet and cash flow position, we ended the quarter with $12 million in cash and cash equivalents. We continued to manage working capital closely, and we ended the quarter with inventories of $108.6 million, down from a year ago and up $1.8 million from September 30.The company's cash provided by operating activities was $10.5 million for the year, and the full year capital expenditures were $14.5 million. We are working to maintain a disciplined and conservative capital allocation strategy, which includes careful cash management, and we have no M&A plan for 2025.Investing in product innovation is essential, but we will be judicious with our cash. As of September 31, 2024, revolver borrowings were $69 million. The term loan outstanding was $83 million and our borrowing capacity on the revolver was $350 million.As of December 31, we were in compliance with all financial and operational covenants. Subsequent to the end of the year, we drew down $277.3 million on the revolver, which matures next year on May 12, 2026. More information will be available on our 10-K filed this morning, but due to uncertainty in the business and our expected level of indebtedness, without the application of successful mitigating strategies, we expect to experience difficulty remaining in compliance with the financial covenants in our credit agreement.Today's 10-K also includes disclosures about the company's ability to continue as a going concern. We are evaluating strategies to refinance our existing debt, and our plans are focused on improving our results in liquidity as we are discussing today.With that, I would like to turn it back to John.
John Larson
Thank you, Laura. As I mentioned in the opening, I am laser focused on accelerating and amplifying the restructuring plan that was already underway and ensuring the company maintains the momentum of these critical initiatives. My focus is 100% on optimizing the bottom line and preserving cash. We have implemented surge teams to focus on the key areas of opportunity.Our most critical initiatives for our strategic turnaround plan include Number one, resetting the organization's cost structure in line with our sales and profit profile. We are working closely with our financial advisors to walk through every line item on our income statement and balance sheet, and have developed an extensive list of initiatives to drive bottom line results starting this year.Two, focusing on profitability by channel, by product for each division to drive the business to where we believe, we can provide stronger margins. Three, resetting our marketing approach, our single biggest line item of expenditure.As you may know, Liz Vanzura recently joined Solo Brand's Board and has now agreed to serve as the company's Interim CMO. This is a former colleague and highly awarded marketing rock star. She has a successful track record as CMO and Head of Brand strategy for companies like Cadillac and Hummer, and has worked at agencies for many years.She also earned the Ad Age's Marketer of the Year award and was inducted into the AAF Advertising Hall of Achievement. We are excited to leverage your strategic ability to lead our marketing efforts, identify the appropriate partners and leading edge AI tools, with the potential to increase efficiency dramatically and reignite our brands.Number four, executing a complete review of our product lineup, simplifying our current product offerings, and strategically repricing our portfolio of offerings. We believe there are significant pricing opportunities to provide clarity for our consumers and to achieve stronger margins.We are fortunate to have a cohesive collection of premium brands with deep customer following, and we expect that being less promotional will help avoid channel conflicts between our directed consumer and retail outlets.Number five, accelerating and amplifying new product launches to drive further momentum in the latter half of the year and identifying new product opportunities. Our team of entrepreneurs already has an innovative mindset, and we know that Solo Stove and Chubbies are exceptionally positioned with strong brand recognition and loyal customers to these brands.Recall, that we consolidated ISLE paddle boards and Oru Kayak into a new water sports division to create a more profitable, scalable platform. We are actively working on a product roadmap for outdoor lifestyle spaces designed to positively impact people's lives as they enjoy leisure time outdoors. Finally, we are creating a metric focused culture and reporting system to track performance in real time.We believe that tying key performance indicators to our actions and providing simple dashboard reporting will allow our culture to align, engage, and succeed. Also developing repeatable processes that enhance operational efficiency and consistency is critical.We plan to track our wins, collect feedback, and analyze failures and successes. Our strategic transformation plan initiatives are tracked and reviewed weekly, and we expect that our quarterly financial results will be the measure of our accomplishments. Regarding tariffs, as we are seeing in similar industries, we now have the impact of tariff uncertainties.As Laura mentioned, we are proactively managing this dynamic situation with a broad range of mitigation plans. To summarize, the company is resetting the organization's cost structure, identifying the key performance drivers in our portfolio, revamping our marketing approach, overhauling our pricing and promotion strategies, accelerating and amplifying our new product launches, and creating a metric-based culture to track performance in real time.Bottom line, we have great brands and products with best in class reviews. We have the foundation. We are resetting our business approach to deliver and improve results. And as we execute our value accretive initiatives this year, we expect the performance upside will be more visible in the back half of the year.Thank you for your continued interest in the company. We look forward to providing updates when we report first quarter results in May. Have a great day.
Operator
The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

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Any lessening of tensions — and freer flow — of these mineral resources in China would be a significant boost to the global economy with China holding outsized leverage in both the reserves and processing capacity of these key building blocks for everything from computers to electric vehicle batteries to medical devices. Likewise, the US offering concessions on export controls would be a significant move after years where successive US administrations have wielded these controls — especially around the design and manufacture of semiconductors — by saying they need to be tight on China for national security reasons. Read more here. May's Consumer Price Index (CPI) report will be released on Wednesday and its expected to show that prices rose a bit faster than in April. Yahoo Finance's Allie Canal breaks down what to look out for and how President Trump's tariffs are impacting what consumers are now paying for goods and services. Read more here. Now that the US-China trade truce is back on track, both sides are keen to ensure it stays that way. China's Vice Premier He Lifeng said both sides need to now 'show the spirit of good faith in abiding by their commitments and jointly safeguard the hard-won results of the dialogue.' Bloomberg News reports: Read more here. Reuters reports: Read more here. Despite the US-China trade truce resuming the pain from President Trump's tariffs remains in China, especially among small exporters. Reuters reports: Read more here. Japan warned Wednesday that tariffs threaten its economic growth, the government said in a monthly report. Reuters reports: Read more here. Reuters reports: Read more here. Reuters reports: Read more here. A federal appeals could said on Tuesday that President Trump's sweeping tariffs can continue for now. This is a significant win for Trump, who introduced tariffs back in March and declared "Liberation Day," as he saw them as a way to free the US from what he called unfair trade practices. Bloomberg News reports: Read more here. Early summer sales for Inditex, the owner of fashion retailer Zara, came in weaker, as the company missed expectations for first quarter sales on Wednesday. President Trump's tariffs have impacted consumer demand in the US and other major markets. Reuters reports: Read more here. After weeks of back and forth, the US and China have agreed on a framework to implement the Geneva consensus that helped ease tariffs. The breakthrough came after two days of talks in London, including a marathon session on Tuesday. US Commerce Secretary Howard Lutnick said both sides had to "get the negativity out" before making progress. 'Now we can go forward to try to do positive trade, growing trade,' he said. As part of the deal, Beijing has promised to speed up shipments of rare earth metals, a crucial component for global auto and defense industries. Washington will ease export controls. This marks the first sign of movement on key issues. The proposal will now be presented to President Trump and China's Xi. Still, the discussions also did little to resolve a long-standing issue: China's trade surplus with the US. 'Markets will likely welcome the shift from confrontation to coordination,' said Charu Chanana, chief investment strategist at Saxo Markets. 'We're not out of the woods yet — it's up to Trump and Xi to approve and enforce the deal.' The meeting was set up after a phone call between the two leaders, following weeks of each side accusing the other of breaking the Geneva commitments. Both countries had used chips, rare earths, student visas and ethane as bargaining tools. Josef Gregory Mahoney, a professor at East China Normal University, said trust, not money, has been the biggest casualty of the trade war. 'We've heard a lot about frameworks,' he said. 'But the fundamental issue remains: Chips versus rare earths. Everything else is a peacock dance.' Bloomberg reports: Read more here. Treasury Secretary Scott Bessent told House lawmakers on Wednesday that the Trump administration may extend the 90-day tariff pause on some countries in order to continue trade negotiations. When asked if Americans should prepare for another "Liberation Day" on July 9, when the tariff pause ends for most countries, Bessent said that the administration may choose to move the deadline on 18 of the most important trading partners, so long as they make an effort to come to the negotiating table. "We are working toward deals on those, and it is highly likely that [for] those countries — or trading blocs, in the case of the EU — who are negotiating in good faith, we will roll the day forward to continue good faith negotiations," Bessent said (see video below). "If someone is not negotiating, then we will not." A recent report on the drastic decline of US ocean imports serves as an example of how President Trump's increased tariffs on China affected supply chains and several industries as ttalks continue. Reuters reports: Read more here. The Treasury Department says that the US government is successfully using tariffs to decrease the budget deficit by more than $30 billion, largely due to increased customs receipts. Reuters reports: Read more here. China will ease curbs on exports of rare earth minerals for six months as part of a new trade understanding with the US, according to The Wall Street Journal. The move could add more uncertainty for American manufacturers, particularly the auto industry, which has been pushing for easier access. The Journal notes that the move gives China leverage down the line if tensions ratchet back up. From the report: In celebrating the agreement early Wednesday, President Trump noted "any necessary rare earths will be supplied, up front, by China." He did not mention any time limit on loosening those restrictions. Treasury Secretary Scott Bessent, in testimony before Congress on Wednesday, painted Wednesday's agreement as an incremental step on the longer road to a more comprehensive trade deal. "A trade deal today or last night was for a specific goal, and it will be a much longer process," he told a House committee. When asked if current US tariff levels on Chinese imports would not change again, Commerce Secretary Howard Lutnick told CNBC, "You can definitely say that." "We're in a great place with China," Lutnick said Wednesday. While the US-China truce framework is awaiting final word from US President Trump and Chinese President Xi Jinping, Lutnick added, "Both sides are really positive." The agreement is largely viewed as reestablishing the "handshake" that US and Chinese officials reached in Geneva last month, as details on a larger trade pact remain scant. Trump posted on social media this morning that the US has imposed 55% tariffs on China, a number that does not include any new tariffs but instead comprises some preexisting tariffs, Trump's fentanyl tariffs, and 10% "Liberation Day" tariffs. Lutnick touted that, as a result of the two-day talks, the US will gain access to rare earths and magnets, while the Chinese delegation sought to remove the US's export controls. He added that the trade deficit remains an ongoing issue, stating, "We're going to examine how China can do more business with us." May's Consumer Price Index (CPI) report showed inflation pressures eased on a monthly basis despite investor concerns that President Trump's tariffs would accelerate the pace of price increases. The Consumer Price Index (CPI) increased 0.1% on a monthly basis in May and 2.4% on an annual basis, a slight uptick from April's 2.3% gain. Yahoo Finance's Allie Canal reports: Read more here. I would keep an eye on consumer names off the news of a trade deal with China floated by President Trump this morning (see our prior post below). Seeing upticks premarket in heavily China-exposed retailers such as Nike (NKE), Walmart (WMT), Target (TGT), and Abercrombie & Fitch (ANF). The premarket gains here aren't mind-blowing in part because tariffs appear to still be in place. Trump posted on Truth Social: OUR DEAL WITH CHINA IS DONE, SUBJECT TO FINAL APPROVAL WITH PRESIDENT XI AND ME. FULL MAGNETS, AND ANY NECESSARY RARE EARTHS, WILL BE SUPPLIED, UP FRONT, BY CHINA. LIKEWISE, WE WILL PROVIDE TO CHINA WHAT WAS AGREED TO, INCLUDING CHINESE STUDENTS USING OUR COLLEGES AND UNIVERSITIES (WHICH HAS ALWAYS BEEN GOOD WITH ME!). WE ARE GETTING A TOTAL OF 55% TARIFFS, CHINA IS GETTING 10%. RELATIONSHIP IS EXCELLENT! THANK YOU FOR YOUR ATTENTION TO THIS MATTER!" A variety of market observers quickly weighed in hours after Tuesday evening's unveiling to suggest that the deal may not have a lot of meat on the bones — but at least relations are no longer moving in the wrong direction. The talks perhaps underscored how unlikely a comprehensive trade deal is anytime soon, noted AGF Investments Greg Valliere, "but at least relations may not worsen as talks continue throughout the summer." Both sides promised additional talks in the weeks or months ahead, but none have yet been scheduled. Veronique de Rugy, a professor at the Mercatus Center at George Mason University, suggested the talks continued to show China's leverage. "China is hurting, yes—but they still hold the upper hand on critical resources, and they know how to use them." Any lessening of tensions — and freer flow — of these mineral resources in China would be a significant boost to the global economy with China holding outsized leverage in both the reserves and processing capacity of these key building blocks for everything from computers to electric vehicle batteries to medical devices. Likewise, the US offering concessions on export controls would be a significant move after years where successive US administrations have wielded these controls — especially around the design and manufacture of semiconductors — by saying they need to be tight on China for national security reasons. Read more here. May's Consumer Price Index (CPI) report will be released on Wednesday and its expected to show that prices rose a bit faster than in April. Yahoo Finance's Allie Canal breaks down what to look out for and how President Trump's tariffs are impacting what consumers are now paying for goods and services. Read more here. Now that the US-China trade truce is back on track, both sides are keen to ensure it stays that way. China's Vice Premier He Lifeng said both sides need to now 'show the spirit of good faith in abiding by their commitments and jointly safeguard the hard-won results of the dialogue.' Bloomberg News reports: Read more here. Reuters reports: Read more here. Despite the US-China trade truce resuming the pain from President Trump's tariffs remains in China, especially among small exporters. Reuters reports: Read more here. Japan warned Wednesday that tariffs threaten its economic growth, the government said in a monthly report. Reuters reports: Read more here. Reuters reports: Read more here. Reuters reports: Read more here. A federal appeals could said on Tuesday that President Trump's sweeping tariffs can continue for now. This is a significant win for Trump, who introduced tariffs back in March and declared "Liberation Day," as he saw them as a way to free the US from what he called unfair trade practices. Bloomberg News reports: Read more here. Early summer sales for Inditex, the owner of fashion retailer Zara, came in weaker, as the company missed expectations for first quarter sales on Wednesday. President Trump's tariffs have impacted consumer demand in the US and other major markets. Reuters reports: Read more here. After weeks of back and forth, the US and China have agreed on a framework to implement the Geneva consensus that helped ease tariffs. The breakthrough came after two days of talks in London, including a marathon session on Tuesday. US Commerce Secretary Howard Lutnick said both sides had to "get the negativity out" before making progress. 'Now we can go forward to try to do positive trade, growing trade,' he said. As part of the deal, Beijing has promised to speed up shipments of rare earth metals, a crucial component for global auto and defense industries. Washington will ease export controls. This marks the first sign of movement on key issues. The proposal will now be presented to President Trump and China's Xi. Still, the discussions also did little to resolve a long-standing issue: China's trade surplus with the US. 'Markets will likely welcome the shift from confrontation to coordination,' said Charu Chanana, chief investment strategist at Saxo Markets. 'We're not out of the woods yet — it's up to Trump and Xi to approve and enforce the deal.' The meeting was set up after a phone call between the two leaders, following weeks of each side accusing the other of breaking the Geneva commitments. Both countries had used chips, rare earths, student visas and ethane as bargaining tools. Josef Gregory Mahoney, a professor at East China Normal University, said trust, not money, has been the biggest casualty of the trade war. 'We've heard a lot about frameworks,' he said. 'But the fundamental issue remains: Chips versus rare earths. Everything else is a peacock dance.' Bloomberg reports: Read more here. Error in retrieving data Sign in to access your portfolio Error in retrieving data

Whole Foods' distributor supplying stores on 'limited basis' after cyberattack
Whole Foods' distributor supplying stores on 'limited basis' after cyberattack

USA Today

timean hour ago

  • USA Today

Whole Foods' distributor supplying stores on 'limited basis' after cyberattack

Whole Foods' distributor supplying stores on 'limited basis' after cyberattack Show Caption Hide Caption Whole Foods to open new locations as part of global expansion Whole Foods Market is continuing its expansion in 2025, adding to its more than 535 locations across the US, Canada and the UK. unbranded - Newsworthy Whole Foods and other U.S. grocers are only being partially stocked as a major food distributor continues to grapple with a recent cyber attack, a recent earnings call revealed. North American wholesale distributor United Natural Foods confirmed this week that it was forced to take some of its systems offline after noticing unauthorized activity. At a financial quarter meeting Tuesday, June 10, CEO Sandy Douglas said the wholesale distributor is only supplying customers on a "limited basis" amid the crisis. "We are partnering with customers across the country and across our formats in various short term mode to serve their needs as best as we possibly can," Douglas told investors. "Any way that we can help them meet their needs, we're doing." The company is working with the FBI and other authorities to determine how to resume services and why the technology defenses failed, according to Douglas. "We just got penetrated, so we will be continuing to look at every aspect of our defense, every aspect of how our tools are working, and what may be necessary to bolster it going forward, because it's clearly an area that requires a tremendous amount of focus from companies today," he said. Users on social media have reported shelves being empty at some Whole Foods locations with signs apologizing for the inconvenience and promising to resupply soon. A Whole Foods spokesperson told USA TODAY on Monday, June 9 that the supermarket chain is working to restock its shelves as fast as possible and said it apologizes for any inconveniences. CEO says it informed investors as soon as it could When asked why the company hesitated to inform investors about the cyberattack and system shutdown, Douglas denied there being a delay. Douglas clarified company officials noticed unauthorized activity in its systems on June 5 and investigated whether it was isolated. By the afternoon of June 6, the company made the decision to lock its systems down. On June 9, it filed a Form 8-K with the Securities and Exchange Commission (SEC) to inform shareholders before the market opened. "So there is no way that we could have communicated any faster, and there was no trading," Douglas added. He also he was unable to confirm whether the shutdown has required customers to break contracts, adding "I wouldn't be able to factually answer that question, even if I was inclined to disclose it." "The focus is making sure we serve the customers and have them be able to do whatever they need to do the best they can in this environment," he said.

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